Value Engineering (VE) on Transit Projects

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Title: Value Engineering on Transit Projects

Phase(s): Preliminary Engineering

Category: Management

Date: January 5, 1996

1. Background

The RAILTRAN Commuter Rail Project extends between Fort Worth and Dallas along an existing 34-mile corridor which was acquired jointly by the cities in 1983 from the trustee of the former Chicago Rock Island and Pacific Railroad. The Federal Transit Administration also participated in the acquisition of this real estate. The cities have designated their local transit agencies, The Fort Worth Transportation Authority (The T) and Dallas Area Rapid Transit (DART), to develop the commuter rail services for the cities.

Service is being implemented in several phases. Phase 1, being implemented by DART, extends 10 miles from Dallas to South Irving. Phase 2, being implemented by the T, extends from South Irving to Fort Worth. Phase 2 is comprised of a series of elements:

An Intermodal Transportation Center (ITC) located at the site of the Texas and Pacific Railway Terminal Building (listed in the National Register of Historic Buildings); a 1.5 mile "downtown" connection between the ITC building and the existing RAILTRAN corridor; improvements and additions to the existing rail facilities within the existing RAILTRAN corridor to allow joint use of operations with freight trains and passenger service which includes passing sidings, signals, upgraded track, etc.; five new passenger stations between the ITC and South Irving; expansion of the Equipment Maintenance Facility developed by DART; and acquisition of diesel locomotives and passenger coaches.

At the concept phase, the project had an estimated cost of $101 million (1992 dollars) at completion. Based on a more detailed preliminary engineering work, the estimated project cost increased to $140 million, significantly above what was considered feasible. At this point the planned Value Engineering program was initiated.

2. The Lesson

Value Engineering (VE) is defined as an organized effort to analyze the function of systems, equipment, facilities, procedures and supplies by a multi-disciplined group for the purpose of achieving the required function at the lowest total cost. Considerations are given to effective ownership consistent with requirements for performance, reliability, quality, maintainability and safety. FTA guidelines endorse the use of value engineering in analyzing the design and cost effectiveness of federally funded projects.   In keeping with the FTA guidelines, The T, through their standard consultant selection process, solicited proposals for value engineering services to be performed on three of their major design components of the Commuter Rail Project. These components included the Intermodal Transportation Center in downtown Fort Worth, the Downtown Rail Corridor, and the RAILTRAN Corridor.  Following selection of the VE consultant, The T collaborated with the consultant in the development of a customized work program which was tailored to the specific issues and needs of the Railtran/Commuter Rail project. The five - phase VE process (Information, Speculation, Analysis, Development and Presentation) was followed; however, additional program features were introduced to maximize the VE results.

A Preparation phase was added to familiarize the design consultants and the owner with the VE process and to establish a "team" concept among the design consultants and the owner. A Decision phase was also added following the VE Presentation phase during which the team members discussed each proposal prior to the owner's decision on acceptance, acceptance with modification, or rejection. This was followed by an Implementation phase during which the design consultants confirmed the cost savings of each VE proposal through more detailed estimates. The VE Manager then monitored the implementation of the proposals through final design.  Also, each VE team was staffed to ensure that the necessary specialized expertise was represented. This was considered especially important on this project which included many diverse and specialized components.

The Fort Worth Transportation Authority recognized early in their Preliminary Engineering design that the available budget could not support the escalating costs of the Project and remain debt free. Prudent management decisions lead to the use of value engineering as one means to bring the costs back into line with available funding. An important part of the VE Studies included the direct involvement of the T's management staff and the design consultants. The design consultants presented the design concepts to the VE team as well as provided them with preliminary design documents, preliminary estimates and schedules. The VE team made a site visit to each of the project components and was accompanied by the project management staff and consultants who pointed out various aspects of the existing conditions and proposed plans. The VE team then began to develop proposals for presentation to The T and it's project management staff.

The VE process was successful in identifying cost savings proposals. Proposals that were not accepted, were rejected primarily because they did not maintain The T's program requirements. Many proposals were not accepted as presented but were noted as warranted for further study. All accepted proposals will be incorporated into the Project during final design.

There were 87 VE Proposals offered for consideration, of which 38 were accepted. The total estimated savings identified by the VE proposals was approximately $11 million. The estimated project cost in which the VE team analyzed was approximately $78 million. The percentage of savings equates to approximately 14%. The cost to perform the VE study was $129,000, resulting in a return of $85 for every $1 invested. 

The T's success in achieving a significant reduction in the project cost is attributable to a number of factors: a prudent management decision to utilize the VE process was fundamental; the timing of the VE studies at the conclusion of preliminary engineering and before final design provided the VE team with the necessary level of design development information and, at the same time, allowed adoption of the proposals without causing serious delays due to lost design effort; the establishment of a team concept involving the collaboration of the owner, VE consultant and the design consultant resulted in a cooperative productive effort; and, finally, the addition of formal preparatory and follow-up phases to the basic five step VE process resulted in a complete program designed to deliver the maximum potential VE result.

3. Applicability

The application of Value Engineering can be applied to most major Transit Capital projects across the nation. It has proven to be a successful method for reducing project costs while maintaining a project's functional objectives. The success of VE can be maximized by tailoring the basic VE process to the specific needs of each project and by integrating the VE effort into the overall project design development process.

4. References

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